Monday, December 22, 2014

North Carolina Attorney General Roy Cooper is among 22 state attorneys general who raised concerns Monday that proposed regulations intended to better protect members of the military from predatory lenders do not go far enough.

Cooper and the other attorneys general voiced the concerns in a letter to the U.S. Department of Defense, which proposed the regulations earlier this year.

The regulations are designed to close loopholes in the Military Lending Act, which Congress passed in 2006 to establish protections for active-duty military and their dependents dealing with predatory lenders.

Among other protections, the act bans members of the military from being charged more than 36 percent in annual interest on certain consumer loans. Payday, auto title and tax refund-anticipation loans are among those covered by the cap.

But attorneys general and regulators say lenders have used loopholes in the act to prey on members of the military. Richard Cordray, director of the Consumer Financial Protection Bureau, a federal regulator, in September said some lenders lurk just outside of military bases to offer loans that fall just beyond the act's limits.

The letter from the attorneys general praises the Department of Defense for proposing regulations that will close loopholes in the act. But the attorneys general say the proposed regulations still leave borrowers exposed to abusive lending practices.

One problem with the proposed regulations is they exempt certain fees, such as application fees, if they are deemed "reasonable and customary," the letter says. That could allow lenders to charge abusive fees to borrowers, the letter says.

The other problem with the proposed regulations is they fail to address predatory practices involving loans backed by collateral, the letter says. Such loans are exempt from the act, but lenders have regularly used the exemption to engage in abusive practices that Congress sought to ban with the act, the letter says.

"The men and women who serve to protect our nation deserve stronger protections from unfair loans," Cooper said in a statement. "These reforms need to be comprehensive and fix the problems we're seeing service members face with unscrupulous lending practices."